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| Entry load ban: MFs may pay more trail commission to distributors |
| Anju Yadav / Mumbai Jul 28, 2009, 00:03 IST |
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 Distributors and fund houses are looking at different ways to counter the Securities and Exchange Board of India’s (Sebi’s) ban on entry load from August 1. The ban announcement came on June 18.
Industry sources said fund houses could increase the trail commission for equity funds to compensate distributors. At present, fund houses pay 0.25 to 0.75 per cent as trail commission to distributors for equity schemes. This number, according to some distributors, could rise up to 1.25 per cent. Trail commission, which is paid to distributors on a quarterly basis, for debt funds is slightly lower at 0.1-0.5 per cent at present.
Sources said any increase in trail commission for debt funds was unlikely as there was minor or no entry load in a majority of these funds.
“It depends on the asset management company’s (AMC’s) strategy whether it wishes to increase trail commission, or upfront commission, or go for a combination of both,” said a distributor. Some distributors said if an AMC was well-established, it would increase only trail commission. This could come from the fund management fees it collected from investors annually. However, smaller fund houses might have to pay both higher upfront and trail commission to promote their products. Some fund houses felt that there could be other ways in which they could help distributors garner more business instead of hiking trail commission.
Amit Gupta, vice-president & country head (retail sales), Taurus Mutual Fund, said, “We will not increase trail commission. We believe in helping intermediaries through marketing support, such as organising joint meetings, which will help them get clients. We are trying to educate distributors as much as possible to make them financial advisors.”
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